Research On The Relationship Between Real Estate Industry And Regional Economy In China

The real estate industry of China has seen significant development in the past ten years, contributing a lot for the stable growth of the national economy. The real estate finance and high prices of the land draw much attention to the public as well as academic research aspect. Among the existing researches, the study of the relationship between real estate industry and the national economy is much more in-depth. However, there is relatively small number of studies on the regional level. Real estate is a special local service industry since its development is directly restricted by the level of regional economic development. The growth potential of this industry leads to the enormous difference in the development of real estate industry between regions. Therefore the status of the real estate in different regional economy should be treated differently.On the basis of previous researches, this paper takes the theory of industrial economics and regional economics as a guide and uses the input-output method to study in-depth the interaction between real estate industry and regional economy as well as the coordinated development of these two variables. First, this thesis points out the interaction relationship between real estate industry and regional economy is a typical relationship between individual and whole or a relationship between local and global based on the theoretical analysis. There are mainly four connection aspects between real estate industry and regional economy: 1) real estate contributing to the regional economy, 2) real estate’s overdevelopment impacting on the regional economy adversely, 3) regional economic development supporting real estate and 4) local government behavior influencing real estate market.Based on the theoretical analysis, this paper empirically analyzes the pulling effect as well as crowding-out effect of the real estate industry on regional economy. Since the real estate industry has a wide range of related industries, the analysis of the contribution of the real estate industry should focus on multiplier effect through related industries. An input-output model is utilized to calculate the pulling effect and finds that real estate industry has obvious pulling effect on regional GDP and production tax while it has little influence on the total area of production output and labor income. Moreover, excessive real estate development will demand a large amount of resources which are necessary for the development of other industries. It can hollow out the real economy and will have negative effect on the long-term regional economic development. Based on the input-output model, an optimization model is constructed for the estimation of crowding-out effect of the real estate industry. Results show that there are 42 samples in 69 real estate industry samples displaying a crowding-out effect. It is found that the investigation on both pulling and crowding-out effect would accurately grasp the whole contribution of real estate industry to the regional economy.In addition, this research further empirically analyzes the impact of regional economic development on the real estate industry. A regression method is implemented to estimate the impact of a single regional economic variables on regional housing prices and real estate investment。 Results show that the regression coefficient of housing price to urban population growth rate per capita GDP are positive and statistically significant. It is also found that the per capita GDP, residents’ deposits and loans of real state enterprise have a significant positive impact on the real estate development investment. Since regional economy influences the development of real estate industry significantly, the healthy development of the real estate industry depends on the coordinated development of regional economy. In this research, it examines the joint development of Beijing, Tianjin and Hebei and analyzes the influence on real estate industries in these areas. It turns out that the industrial transfer among these three areas can actually promote the real estate industry of Hebei while improve the quality of economic growth in Beijing.Upon the empirical analysis of the interaction between the real estate industry and regional economy, this research further conducts a comprehensive evaluation model about the degree of coordination between the real estate industry and regional economic development. Indicators are selected from five aspects named as 1) direct contribution, 2) industrial relations, 3) residential consumption, 4)internal structure and 5) environmental construction. In addition, a fuzzy comprehensive method is chosen to judge 69 samples. The result shows that the degree of coordination between real estate industry and regional economy is relatively low, especially in the industrial relations and environmental coordination.Throughout the entire process of the study, it supplements current researches from both theoretical and empirical perspectives. To be more accurate,contributions of this research are listed as follows.1. It is known that the discussion on the relation of real estate price and land price that mainly focused on the causality. This research points out that the real estate and the price of real estate is substitutes of land and the price of land respectively. The reason are 1) the land cannot be used alone as the storage medium of wealthy and 2) residents were forced to purchase real estates to achieve the goal of owning the lands where the real estates were built upon.2.This research has created an optimization input-output model by embedding a limit of total resource in the closed input-output model. When the result of the simulation shows the total output of real estate industry needed to be lowered to maximize the potential GDP of a region, it means that the real estate industry has taken an excess of resources and crowding-out other industries and therefore has a negative effect on the regional economy.3. Different from other existing studies that are often only focus on a simple comparison of the development of real estate industries between China and other countries or among different domestic regions, this research focuses on individually regional and analyzes the influence of the regional economic relation on the development of real estate industry by creating improved inter-regional input-output model by using examples of industrial transfer of Beijing, Tianjin and Hebei.4. Most of existing studies choose regression to reflect the co-efficiency of regional real estate industry and regional economy from different sides or simply combine the real estate industry subsystem with regional economic subsystem.Different from those studies, this research selected indicators and applied fuzzy method to better adapt to this topic while the co-efficiency of the regional real estate and the development of regional economy need to be determined.